Archive for November 12th, 2009

There are people out there who believe that some of the ancient wonders of the world such as the Egyptian pyramids or Stonehenge could not possibly have been built by “primitive” man; the pieces of stone were too massive, the joints too perfect, the engineering far too complex for early man to have done this unaided. Some of these structures are lined up to predict the turnings of the seasons, marking the summer or winter solstice or are lined up to “true” north or have dimensions that were developed according to the golden ratio in order to achieve a aesthetically pleasing design; feats that seem impossible to many of us today, because many of us personally would have no idea how to accomplish them. So how could early or primitive man?

Some have gone so far as to point to these feats as “proof” of past alien visits to the Earth to assist us on the path to civilization. These kinds of beliefs often simply uncover our own ignorance and can be made when people equate early man or primitive man with primitive or a lack of intelligence. While I may question the intelligence of man, given some of the things as a species we have done, such as despoiling our environment, our current level of intelligence has been with us since Homo sapiens came into the picture. Just as it is a mistake to underestimate the intelligence of your adversaries, it is a mistake to underestimate the intelligence of early man. We are Homo sapiens, or wise man, and if we put our minds to it we can accomplish quite a bit.

A question I have asked myself occasionally is how do excellent organizations arise? Assume for a moment that we can agree on the definition of an excellent organization, the question is does mankind have the ability to create a Google type organization on our own? Or will the creation of Google as well as some other really excellent organizations be pointed to by some future generation as further evidence of alien visitations? Organizational aliens who came to Earth to show us the way towards organizational improvement? Are Larry Page and Sergey Brin really of this planet or are they here just to help us get on our feet?

The Rare Earth Hypothesis states that the life on Earth arose due to an extremely rare combination of events – one in a billion or more. If you believe in the Rare Earth hypothesis life in the universe would be very uncommon, occurring only very occasionally. The principle of mediocrity is just the opposite. It states that the Earth is nothing special. It is a typical rocky planet, revolving around a very average star, located in the Milky Way, an average galaxy. And if you believe in that hypothesis, life in the universe would be much more likely to arise on multiple planets.

If we use those analogies to think about the rise of excellent organizations, are they more like the Rare Organizational Hypothesis, excellent organization arise due to an extremely rare combination of events (e.g. very profitable, dominates industry segment, changes the paradigm) and hence come along just every great once in a while. Or are they more like the principle of mediocrity (possibly a poor choice of labels), whereby every organization has within it the potential to become truly excellent. All we need to do is unlock the potential.

Personally, when previously asked, “what do I get out of my work, what do I find rewarding”? My response has been consistent. I work with organizations that tend to have relatively large numbers of employees. Through my work I strive to make the organization a more effective, a more efficient place. At the same time if I can make the work environment 10% or 15% better for the people who work in that environment, I feel that I have done my part, if not to improve the whole world then to improve the piece of it that I can touch.

But somehow deep inside me I find that answer is not good enough. I want to push this Homo sapien to the edge. I want to create and be part of excellent organizations. I don’t want to just go along for the ride, I want to be part of something special. I want to be able to point to a lasting artifact, a pyramid and say I had a hand in that. For that to be more likely to come true I am rooting for the principle of mediocrity (that true excellence can be common), and that what we need to do is unlock the potential that is deep inside all organizations.

But there is a warning sign waving out there. It is the Fermi Paradox. It states that if alien life is common, given the age of the universe, we should not have to look very hard to find them. Homo sapiens have been building organizations for a very long time. How easy it is to find truly excellent ones?

Many of us tend to live our lives at capacity. Our lives are busy, packed with activities both personal and work related. We rush our children from school to after school activities to organized play dates to fast food meals on the go. We don’t even go into the restaurants anymore but simply drive through so we can pick up our food on the run. Our children are so busy that they need social calendars to keep track of their myriad activities. (I seem to remember when I was a kid being told to simply go outside and play. If you were really lucky a neighbor would have just had a load of top soil delivered and they would let you play in it. There were no organized play activities.) We try to fit in so many things into our weekends that we can’t get to during the week that by Monday morning we are exhausted from our days of rest.

A search on the phrase at capacity returns hundred of hits. The hits describe all sorts of systems and activities that are operating at or near capacity. Everything from roads, to hospitals, universities, concerts, ball games, water supplies etc. are just about maxed out. One report described how Disney is occasionally forced to shut down their admission line to the theme park because the park was at capacity. Airports and airlines are once again at capacity and just the other day there was a report that July was among the worst ever for delays and cancellations of flights. The story indicated that it was partially induced by weather but also due to our airline transportation system operating at capacity. It sometimes feels like we engineer obsolescence, or an at capacity limit right into all of our systems and activities, for you wouldn’t want extra of something, that would be wasteful.

When you get a product delivered that needs assembly and they send you just the right number of bolts or screws you can rest assured that at least one of those critical components will slip away and forever be lost to the little house goblins that collect such things. I am pretty sure they also have a fairly terrific selection of socks from the dryer. When I get a product delivered and they send me a few extra parts of the pieces I am likely to lose or drop, I am forever grateful and more likely to repurchase from that supplier.

As a consumer what would it be like for you to walk up to a ball park or a theater or a concert hall, buy a ticket without waiting in line, in fact a terrific ticket, great seats, then casually stroll into the venue and enjoy a really great show? You would probably enjoy yourself tremendously wouldn’t you? And in fact you might be willing to pay just a bit more for an experience like that (that of course is the notion behind first class on airlines, at least as I recall what first class used to be like).

Organizations like to operate at capacity, maximizing the utilization of each staff member, each asset to what is perceived to be the maximum, operating under the notion that it is the path to superior performance and profit. But is that always true?

If you build the road, they will come. There is a concept out there called induced demand; the thinking behind it goes something like this. Commuters in large cities are continually clamoring for better and more roads to help ease their long waits in bumper to bumper traffic as they travel from home to work and back. There was a study done regarding road congestion to determine the impact of road development on congestion. What was found was a bit surprising. As new roads were built in metropolitan areas, in an effort to relief the congestion, no relief was to be found. The new road simply extended the reach of the metropolitan area and caused the congestion to move along with the road construction. The available road capacity created an induced demand for additional housing and development, simply keeping the congestion at the level it had been at. Commuters can’t catch a break.

So the question arises if an organization such as Disney were simply to add additional capacity so they would not have to shut down at the “at capacity” level they had reached would more people simply show up, once again pushing them to the edge albeit at a higher capacity level? Greeting card manufacturers try to use the notion of induced demand to their benefit. They do their best to create an induced demand by inventing new reasons for sending out cards to mark special occasions. Sometimes they are successful, sometimes not. Some consulting companies would like nothing better than to create the next business fad, creating an induced demand for their product, with businesses wondering how they ever got by without it. Other examples of induced demand abound.

The war in Iraq is illustrative of two different points of view regarding working at capacity. Donald Rumsfeld the initial architect of the current conflict felt that you go in with just enough troops to do the job. You don’t waste resources; you maximize the ability of the force you have to wage war. You use the army in a sense at capacity, just enough force to get it done. In the rush to battle he was infamously quoted as saying that “as you know, you have to go to war with the Army you have, not the Army you want”, in reference to the army not being fully equipped for the coming battles. That might be true if you are fighting for your very existence or the existence of your country but that was certainly not the case. Colin Powell had a different philosophy regarding ensuring success on the battlefield. He was the architect of the first Iraqi war. His philosophy was you go to war with an overwhelming force, a force that is so far beyond what your enemy can field that you are hopefully ensured a quick and less bloody confrontation. You provide excess capacity especially of critical components to ensure success, to maximize your potential for a win.

Think of this from the soldier’s viewpoint for a minute. Would you rather go to war knowing that you are part of an army that is fielding an overwhelming force against an enemy or that you are part of a force that has just enough strength to get the job done? In which scenario might you have more confidence that you might come home alive? In which scenario will the morale of the troops be higher?

I have to wonder if the same principles hold true in the day-to-day business world. I would argue that they do. By maximizing the utilization of the individual employee there is no slack, no ability to take advantage when new opportunities come along. The notion of induced demand, an organization having the capacity to better serve their customers by having more products and services available to them would also seem to hold. You of course have to be careful not to have too much excess capacity, but excess capacity should not be viewed as wasteful but rather as the ability to respond to unexpected customer demands and opportunity. The ability to have excess capacity should be built into the basic cost structure so as to assure that the ability to respond to customer needs does not equate to bankruptcy. The ability to be responsive, to give customers the service they need without requiring them to wait in line just might lead to more positive customer relationships and hence a desire on the part of the customer to conduct more business with that organization.

Excess capacity does not need to exist throughout the entire organization. Excess capacity will have a greater impact on the organization’s ability to perform if it is concentrated into mission critical areas, the guts of the organization. Mission critical areas are those that are directly involved in servicing or providing product to your customers, those areas that impact your ability to deliver the most or those that can severely impact the organization if they were to fail.

Running an organization at capacity should not be viewed as running a tight ship; rather running at capacity should be viewed as creating a situation for missing potential opportunities and increasing risk to the organization.